If you are divorcing and you or your spouse own a business, the process of ending the marriage is both a personal and professional one. Thus, emotions can run high, and livelihoods can be on the line, so it is crucial to understand the legal process and strategies involved.
Critical considerations for business owners
In West Virginia, a business created during the marriage is typically marital property, subject to division between spouses. However, a company is not like a bank account or treasured heirloom; you cannot just divide it in half or give it to one person. There are several key factors to assess when a business is part of your divorce:
- Business valuation: Determining the accurate value of your business is a foundational step. Working with a professional appraiser ensures that parties know the fair market value and can negotiate based on these figures.
- State law implications: West Virginia adheres to the equitable distribution principle, meaning marital assets, including businesses, are divided fairly, though not always equally. Courts consider various factors, such as the length of the marriage and each party’s contributions to the business.
- Options for ownership transfer: Should one partner wish to retain the business, they may buy out the other’s share. This transaction is contingent upon the business’s appraised value and may be structured as a lump sum or in installments.
- Each person’s role in the business: Factors like how involved each person is in the enterprise and what parties contributed to the business during the marriage can affect the treatment of the entity in a divorce.
Taking these factors into account can help you get a clearer picture of what the future of the business might look like.
Potential outcomes for the business
The destiny of your shared business will largely hinge on mutual decisions and, if necessary, judicial determinations. Generally speaking, the potential outcomes for divorcing with a business include:
- One person buys the other out to keep the business
- Parties continue to run the business together
- Selling or closing the business
Before making any decisions or assumptions about a business, you must examine any agreements in place, from buy-sell agreements to prenuptial agreements. Further, it can be imperative to consult with an attorney specializing in both divorce and business law to navigate this process effectively.